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Gov't promises companies, households Ft 167 bln net tax cut

The final version of the government's tax package, submitted to Parliament a week ago, will mean a Ft 227 billion gross reduction and a Ft 167 billion net cut in taxes and contributions in 2009, Finance Minister János Veres told MTI on Friday.

Companies will enjoy a Ft 122 billion net reduction and households a Ft 45 billion cut, Veres said. The net cut will be made possible mainly by a reduction in expenditures at the ministerial level.

The figures are up from a Ft 205 billion gross tax reduction and net tax savings of Ft 145 billion, Veres announced when the package was submitted to Parliament after last-minute changes last Friday.

If Parliament does not approve the government's Robin Tax - an 8% tax on energy company profits that will be used to subsidize homeowners with district heating - the state will not have the resources to support Hungarians with district heating, Veres said. The tax is expected to generate budget revenue of Ft 31.6 billion, he added.

Veres said he was still of the view that the subsidy should go only to low-income households, but he acknowledged the government decision to make the subsidy to all households with district heating.

Earlier this week the government approved a decree, taking effect in October, which would give compensation to all households, with the actual compensation varying on household income.

Veres said he agreed with former government coalition partner SzDSz's proposal to introduce a budget spending ceiling, but said it would be enough to vote on the proposed budget rules in a bill on public finances long before Parliament which contains a similar formula.

Asked about SzDSz's other proposal to reduce the budget deficit to 3% by 2009, Veres said he was ready to discuss the idea if SzDSz specifies the source of the necessary Ft 60 billion. “If SzDSz wants to reduce the deficit, then it should not say it wants bigger tax cuts.”

Asked about reports that he would “better protect” the budget than the prime minister, Veres said he wanted to stick to the convergence program.

“From the start, I made it clear I would not put any budget to the government or Parliament that did not ensure the deficit levels in the convergence program,” he said.

Asked about his reported dispute with Prime Minister Ferenc Gyurcsány over the budget, Veres said he had no argument with the prime minister, neither about the deficit nor about the fact that the tax cuts outlined in the Consensus Program are covered only in the first year of the package. Afterward, everything depends on how much revenue will be generated from a crackdown on the shadow economy, he said.

Taxes can be cut as much as possible as long as the 3.2%-of-GDP deficit target is kept, he said.

The final version of the tax package was prepared in the Finance Ministry, and - after a dispute - it was accepted by the cabinet, he said. (MTI – Econews)